For a change, no one in Prime Minister Narendra Modi’s government or in the ruling Bharatiya Janata Party (BJP) is talking about making India a $5 trillion economy by 2024 any longer. They have rightly fallen silent on the issue. The economy, which was a “sweet spot” during the first few years of Narendra Modi’s first term, had turned into a tight spot after the emphatic victory in the Lok Sabha elections this summer. No irony is intended because the BJP did not win the general election on its economic achievements. The news on the economic front, as it stands today, is pretty grim, to say the least.
Union finance minister Nirmala Sitharaman has been bravely grappling with the situation, turning back firmly on her first Budget and taking what can be described as emergency measures to pull the economy out of the doldrums, creating larger public sector banks (PSBs) through mergers and recapitalising some others, reducing corporate taxes in the hope that things will get better soon.
The declaration by the newly-chosen managing director of the International Monetary Fund (IMF), Kristalina Georgieva, that 90 per cent of the world economy will have its worst growth rate since the 2008 global financial meltdown, the not-so-good rating for India on the Global Competitive Index of the World Economic Forum, and the Reserve Bank of India revising the estimated growth rate for 2019-20 from 6.9 per cent to 6.1 per cent only adds to the pain of the country’s stupefied economy. The only silver lining in the RBI’s assessment is the good monsoon this year, which should ensure a good agricultural output, which in its turn should lead to greater rural demand. But it remains a pious hope at the moment because the global trade wars, especially between China and the United States, and the subdued global commodity prices could make things difficult for the national economy in 2020-21, though the RBI has projected seven per cent growth in the next financial year.
It is indeed a point of debate whether the post-Budget policy tweaks of Ms Sitharaman would prove effective or not. But it is not necessary to prejudge their effectiveness. What is of real concern is the fact that there is a lull in both private investment and private consumption. In the first term of the Modi government, what had kept the economy clocking a reasonable average growth rate of seven per cent was public investment and private consumption. The government’s zeal for public investment has cooled down a bit. And the people are hesitating to spend enough to create the demand that will set the manufacturing and service sectors humming.
Mr Modi and his colleagues in the government will have to ponder over the invisible economic lockdown that is the cause behind the decelerated growth rate. Both big and small businesses are tightlipped about their ventures because they are holding themselves back. So, whatever happened to the improved Ease of Doing Business ranking of the past few years? Why is it not showing up in economic bustle? Why is it that Mr Modi had to do a desperate sales pitch for American businesses to invest in India in New York last month in the same tone that he did in Washington in 2014 when he visited the United States immediately after taking over as Prime Minister? There has been an increase of about $60 billion in foreign direct investment (FDI) in the past five years, but it has not impacted the growth rate in the same proportion. Foreign portfolio investments have been coming in and going out of the country at a brisk pace.
It is not surprising then that BJP president and Union home minister Amit Shah, who is the party’s chief campaigner in the Haryana and Maharashtra Assembly elections to be held on October 21, is harping loudly and clearly and without any let-up on the Modi government’s decision to abrogate Article 370 of the Constitution granting a special status to Jammu and Kashmir and on implementing the National Register for Citizens (NRC) in all parts of the country. He is deftly side-stepping the economic challenges facing the government. Mr Shah and the party must be happy that they have succeeded in taking the attention away from the troubling issue. But the people’s sense of unease over the stuttering economy remains.
Rashtriya Swayamsevak Sangh (RSS) sarsangchalak Mohan Bhagwat dismissing concerns over the economic slowdown as exaggerated is of no real value, but it does not have much of an impact because he is not a part of the government or the BJP. It is the silence of Mr Modi, the man who speaks, over the economy that is interesting. He has not referred to it in his monthly radio talk, Mann Ki Baat. It indirectly reflects the view of the government that the slowdown is a temporary thing, and there is no need to lose any sleep over it, and that there will be a recovery sooner than later. But the recovery looks unlikely in the short term, and it is the short term problem that affects people the most.
The unverified information that the government plans to extend import duties from onions to many more things as a way to boost “Make In India” can turn out to be a bad idea. Unlike US President Donald Trump, Prime Minister Modi and Chinese President Xi Jinping have been arguing for a free trade system because that is the need of emerging economies like India and China.
So it is finance minister Nirmala Sitharaman who is left to hold the squealing economy. She is doing what she can. It would be helpful if others in the government, including Mr Modi, stepped out and spoke about the economic challenges facing the country in a realistic manner, without any hyperbole, as that would improve the image of the government.
The writer is a Delhi-based commentator and analyst...